Moody's downgrades Enron

Moody's Investors Service downgraded Enron Corp., affecting $12.4 billion of long-term debt.

The rating agency cut the company's senior unsecured debt to Ca from B2, its senior subordinated notes to C from Caa1 and its trust preferreds to C from Caa2 following Enron's Chapter 11 filing. Moody's also cut Marlin Water Trust's senior unsecured debt to C from Caa2, Marlin Water Trust II's backed senior secured to C from Caa1, Osprey Trust's backed senior secureds to C from Caa1 and European Power Ltd. Co.'s senior secureds to C from Caa1.

Moody's said the downgrade reflects "the expectation that recovery rates on senior unsecured claims will be low."

Moody's cut Northern Natural Gas' ratings to B3 from B2and left them under review for further downgrade. Moody's said it will monitor Northern Natural Gas' ability to meet its debt obligations and the potential for it to be included in Enron's reorganization.

S&P cuts Enron to D

Standard & Poor's downgraded its senior unsecured ratings on Enron Corp. to D from CC and its subordinated debt and preferred stock to D from C after the company filed for Chapter 11.

Azurix Corp., Transwestern Pipeline Co., Northern Natural Gas Co. and Enron Funding Corp. remain at CC and on CreditWatch with negative implications while Marlin Water Trust II, Osprey Inc. and Osprey Trust remain at C and on CreditWatch with negative implications. These units are not involved in the bankruptcy but S&P said it would be monitoring how the case progresses.

Fitch cuts Enron to D

Fitch downgraded Enron's senior unsecured, subordinated debt and preferred stock to D after the company filed for Chapter 11. It maintained at CC Northern Natural Gas Co. and Transwestern Pipeline Co. and kept them on Rating Watch Negative. Fitch also cut the senior secured notes of Marlin Water Trust II and Osprey Trust to D from CC.

Fitch said it expects recovery rates on senior unsecured claims in the 20% to 40% range, with subordinated and preferred stock recovery rates significantly less.

Fitch noted Enron's wholesale trading, "once the largest generator of earnings and cash flows (each approximately 75%), and once considered a very valuable property, has for all practical purposes ceased operations and in a post-bankruptcy scenario, may in fact be difficult to resurrect."

Without tangible assets, "the trading business may be of little future value unless it can quickly resume operations, although even then it is unlikely to return to its dominant position," Fitch said.

Fitch believes liquidation of Enron rather reorganization is "a distinct possibility."

The rating agency noted its D assessments indicates it expects recovery of below 50%.

Moody's downgrades Ifco Systems

Moody's Investors Service downgraded Ifco Systems NV and changed the outlook to negative from stable, affecting €365 million of debt. Ratings affected include: $148.0 million senior secured credit facilities due 2003 lowered to B2 from B1 and €200 million 10.625% senior subordinated notes due 2010 lowered to Caa1 from B3.

Moody's said the downgrade reflects IFCO's "continued underperformance compared to Moody's expectations, as well as growing concerns regarding the company's overall liquidity profile, and its ability to strengthen internal cash flow generation to a level sufficient to adequately fund the business and service debt obligations going forward."

Moody's put Bell Canada on review for downgrade

Moody's Investors Service put Bell Canada International Inc.'s senior unsecured notes (B2) and unsecured convertible subordinated debentures (B3), as well as the company's B2 issuer rating and senior unsecured rating on review for downgrade.

Bell Canada on Monday announced a number of steps to be taken over the next few months that will address its liquidity problems. While this should assure adequate funding of BCI's cash needs until March 2003, Moody's noted that at that point the company's remaining debt of around C$730 million will largely be supported by a slightly reduced ownership in a restructured Telecom Americas Ltd., plus a 27.7% interest in Axtel and a 75.6% interest in Canbras.

These investments are not expected to generate cash for Bell Canada's ongoing needs for the foreseeable future, Moody's said. Therefore, Moody's said Bell Canada would need to liquidate assets to satisfy remaining debt, although values and marketability of the investments remain problematic.

Moody's downgrades Mariner Energy

Moody's Investors Service downgraded Mariner Energy Inc.'s ratings including its $100 million of 10.5% senior subordinated notes to Caa2 from B3. The outlook is negative.

Moody's said the downgrade reflects the absence of potential support from Enron going forward and the negative outlook reflects uncertainty regarding the effect of Enron's bankruptcy on Mariner.

Enron indirectly owns 96% of the firm through Joint Energy Development Investments LP (JEDI), and indirectly contributed about $130 million in equity during 1998-2000, Moody's said.

Through Sept. 30, 2001, Mariner sold 38% of its oil and gas production to Enron under one to three month production contracts. Mariner also has commodity price hedges with Enron through 2003.

S&P rates new Findexa bonds B-

Standard & Poor's assigned a B- rating to Findexa AS' planned offering of bonds.

Moody's rates new Findexa notes B2

Moody's Investors Service assigned a B2 rating to the planned offering of senior notes by Findexa II AS.

Moody's said its assessment reflects "financial risks from Findexa's elevated leverage, modest initial EBITDA coverage of total interest and an aggressive capital structure. It further reflects the challenge to grow per customer revenues and control costs stringently to deliver profit growth in the fairly mature Norwegian market, to reverse negative customer retention trends over the last couple of years and to reduce above average error rates following the introduction of new information systems over the last two years. Like its peers in the European industry Findexa faces uncertainties from the further migration of its products to electronic distribution over the medium term."

On the positive side, Moody's said its ratings incorporate "the cash generative nature of Findexa's business, solid barriers to entry to the Norwegian directories industry, where the company faces very limited competition and management's commitment to keep the company on a de-levering trajectory. The scope for margin improvement through cost cutting and product improvement has also been factored into the rating."

S&P cuts Avado to D

Standard & Poor's downgraded Avado Brands Inc.'s $125 million of 9¾% senior unsecured notes due 2006 to D from CC after the company missed an interest payment on the securities.

Moody's downgrades Resolution Performance Products

Moody's Investors Service downgraded Resolution Performance Products, LLC, affecting $754 million of debt. Ratings affected include the company's credit facilities, cut to B1 from Ba3 and its senior subordinated notes - including the recent add-on - cut to B3 from B2. The outlook is stable.

Moody's said the downgrade is a result of "lower earnings and creditor protection measurements than anticipated in 2001."

Moody's added that it considers as debt the $158 million of junior subordinated PIK notes of the parent holding company.

Moody's said it expects that "the economic slowdown will continue to adversely affect demand in the company's end-use markets, including construction and automotive, electronics and telecommunications, and demand for capital expenditure related end products."

Moody's downgrades Kinetek

Moody's Investors Service downgraded Kinetek, Inc., affecting $310 million of debt. Ratings affected include $40 million of senior secured credit facilities, cut to B2 from B1, and $270 million of 10.75% series D senior unsecured notes due 2006, cut to Caa1 from B3. The outlook is negative.

Moody's said the downgrade reflects "the company's constrained liquidity, deteriorating credit profile, and expectations of further decline in operating results. The ratings also reflect the company's aggressive financial policy, resulting in high debt levels and a weak balance sheet."

The rating agency noted: "The prolonged economic downturn has led to softening demand from across the company's key end-markets."

Moody's rates Teekay add-on Ba2

Moody's Investors Service assigned a Ba2 rating to Teekay Shipping Corp.'s add-on to its senior notes due July 15, 2011. It also confirmed the company's existing ratings including its Ba1 credit facility and first preferred ship mortgage notes and the Ba2 existing senior notes. The outlook remains positive.

Moody's said its ratings recognize "Teekay Shipping's position as the world's largest operator of medium-size oil tankers, its modern, largely double-hulled tonnage comprised mostly of uniform, interchangeable vessels, a strong network of customer relationships, its record of sound management and low-cost operations, and resulting strong financial performance. The ratings also consider the cyclical nature of the tanker industry with charter rates, and therefore also profitability and asset values, highly subject to global oil production levels and demand patterns, and changes to overall tanker vessel capacity."

Moody's said it has a positive outlook despite the recent cyclical downturn in tanker charter rates and expected continuing softening because it believes Teekay's capital structure and its low operating cost structure position it "well to maintain strong cash flow during a period of economic weakness."

Moody's downgrades Jordan Industries

Moody's Investors Service downgraded Jordan Industries Inc. affecting $489 million of debt. Among the ratings affected are the company's $275 million of 10.375% senior notes due 2007, cut to Caa3 from B3, and its $214 million of 11.75% senior subordinated discount debentures due 2009, cut to Ca from Caa2. The outlook is negative. The following ratings were lowered:

Moody's said the reduction reflects "a severe deterioration in Jordan's operating performance, its substantially constrained financial flexibility, and sharply weakened credit profile. The negative outlook reflects Moody's expectation of further weakness in the company's performance as well as heightened concerns over its liquidity condition in near to medium term."

Jordan has been "severely impacted" by the on-going economic downturn, Moody's said. Although Jordan operates in a diverse range of business segments, most are either cyclical themselves or exposed to cyclical industries.

In addition, Moody's said, the company's business units tend to be small-sized and operate in competitive niche markets, and are thus susceptible to swings in economic conditions and pricing pressures.

Moody's confirmed Equity Inns preferred stock

Moody's Investors Service confirmed the B3 cumulative preferred stock rating of Equity Inns Inc. affecting $69 million of securities. The outlook is negative.

Moody's said Equity Inns has much of its assets in the limited-service hotel segment, which tend to service drive-by traffic, will experience less revenue per available room (RevPar) erosion than the more upscale segments, such as luxury hotel, convention and resort properties, particularly in airport hub cities.

The company is also facing constrained financial flexibility although management is committed to maintaining its preferred dividend and Equity Inns has no debt maturities until October 2003.

Moody's downgrades Exide

Moody's Investors Service downgraded ExideTechnologies Inc.'s ratings including its senior secured bank debt to Caa2 from B3, its senior unsecrued notes to Ca from Caa2 and its convertible senior subordinated notes to C from Ca. The outlook remains negative, Moody's said.

The action reflects Moody's amplified concerns regarding Exide's current liquidity crisis and the escalating probability that Exide will default on its bond interest payment requirements within the next year. The next bond interest amounts and payment dates are about $5 million due Dec. 15 and around $19 million due April 15. Moody's additionally is concerned that Exide's customers may look to alternative suppliers for both existing and new battery contracts in the event that Exide's financial situation deteriorates further

S&P rates OM Group new notes B+

Standard & Poor's assigned a B+ rating to OM Group Inc.'s planned offering of senior subordinated notes due 2011.

S&P rates United Surgical new notes B-

Standard & Poor's assigned a B- rating to United Surgical Partners International Inc.'s planned offering of subordinated notes due 2011.

Moody's downgrades Meristar

Moody's Investors Service downgraded MeriStar Hospitality, MeriStar Operating Partnership, LP and CapStar Hotel Co., affecting $1.7 billion of securities. Ratings affected include the senior unsecured debt, cut to B1 from Ba3 and the subordinated debt, cut to B3 from B2. The outlook is negative.

Moody's said its action reflects MeriStar's "weakened coverages and liquidity, and declining revenue performance, following the events of September 11th.

"MeriStar's operating performance has been substantially undermined by the post-September 11 decline in leisure and business travel. Moody's believes that MeriStar's portfolio is particularly vulnerable, given its reliance on corporate and group bookings, which are key demand drivers for the upscale lodging segment," Moody's added,

Moody's cuts Host Marriott

Moody's Investors Service downgraded Host Mariott, affecting $3.6 billion of debt. Among the ratings affected are the senior unsecured ratings of Host Marriott Corp., Host Marriott, LP and HMH Properties, Inc., cut to Ba3, from Ba2; the Quarterly Income Preferred Securities of Host Marriott Financial Trust, cut to B2 from Ba3; and the preferred stock ratings of Host Marriott Corp., cut to B3 from Ba3. The outlook is negative.

Moody's said the negative outlook reflects an "expected prolonged, difficult lodging environment."

The downgrades are a result of the deterioration in Host Marriott's operating performance following the events of Sept. 11.

"Because of the significant decline in business and group travel, the major demand driver for the REIT's upper-upscale lodging segment, Host Marriott's RevPAR declined as more than 50% compared to 2000 the week after those events," Moody's said. "While the REIT, like its peers, has experienced consistent and substantial improvement in RevPAR trends since September, recovery to more stabilized demand levels is not expected to occur until well into 2002. As a result, Moody's anticipates that in the medium term Host Marriott will operate with reduced debt protection measures that are not consistent with the Ba2 rating category."

Moody's downgrades Amtrol

Moody's Investors Service downgraded Amtrol Inc. Ratings affected include the company's $55 million of senior secured credit facilities, cut to B2 from Ba3, and its $115 million of 10.625% senior subordinated notes due 2006, cut to Caa3 from B3. The outlook is negative.

Moody's said it took the action because of Amtrol's "constrained financial flexibility, declining operating performance, and weakened credit profile. Amtrol has been negatively affected by the ongoing recessionary economic conditions that have resulted in lower volume and increased pricing pressure. The inability of the company to generate sufficient volume has impaired its ability to absorb its fixed costs. As a result, a 7.5% decline in revenues for the past 9 months has resulted in a 37% drop in operating income."

In addition, Moody's said, "competition continues to exert pricing pressure, although it appears to have shown signs of easing for the time being."

Moody's rates United Surgical new notes B3

Moody's Investors Service assigned a B3 rating to United Surgical Partners International, Inc.'s planned offering of senior subordinated notes due 2011 and a B1 rating to its planned $100 million senior secured credit facility. The outlook is stable.

Moody's said the ratings reflect the company's "high leverage, its modest coverage and short operating history. Also reflected are potential complications that may arise out of the company's US/European operating platform, the anticipated acquisitive nature of the company and the competitive business environment in which it operates."

Positively, Moody's noted United Surgical's position as "one of the leading operators within the free standing surgery center market, strong operating trends (including cash flow generation), favorable demographic and industry trends, an experienced management team and limited exposure to government payors."

S&P downgrades Sea Containers

Standard & Poor's downgraded Sea Containers Ltd. Ratings affected include the senior unsecured debt and the subordinated debt, both cut to B+ from BB-. The outlook is negative.

S&P said its action is the result of "weakened credit ratios that are due to reduced earnings and cash flow that are not expected to improve materially for the foreseeable future."

Sea Containers has "strong competitive positions in several cyclical businesses" but a "somewhat weak financial profile," S&P said.

Marine cargo container operations have been hurt by industry overcapacity, made worse by the economic downturn, S&P said. Leisure operations have been negatively affected by reduced travel due to the economic downturn and the impact of the events of Sept. 11. However, Sea Container's passenger transport operations have recovered due to lower fuel costs and the return to more normal operations on GNER in the U.K. after a series of fatal accidents over the last year.

Plans to sell five million shares of Orient-Express in late 2001 after the initial public offering in August 2000 with proceeds to reduce debt have been deferred. If they go ahead they will be a credit negative S&P said because they will reduce asset values and the cash flow available to service debt.

Fitch rates KB Home's new notes BB-

Fitch rated KB Home's new $200 million of 8 5/8% senior subordinated notes due 2008 at BB-. It also confirmed the BB+ senior unsecured debt.

Fitch said its ratings on KB Home are based on the company's "geographic diversity, primary focus on the entry-level homebuyer, solid operating performance and transition to more conservative building practices. Risk factors include the inherent cyclical nature of the homebuilding industry."

S&P downgrades IT Group

Standard & Poor's downgraded The IT Group Inc. and kept it on CreditWatch with negative implications.

Ratings affected include the company's credit facilities, cut to B+ from BB- and the senior subordinated notes, cut to B- from B. Also downgraded are Ohm Corp.'s convertibles, cut to B- from B. The convertibles are obligations of IT Group.

S&P puts Amtrol on negative watch

Standard & Poor's put Amtrol Inc. on CreditWatch with negative implications. Affected ratings include the credit facilities, rated B+ and the senior subordinated notes rated CCC+.

S&P downgrades Dillard's to junk

Standard & Poor's downgraded Dillard's Inc. to junk levels. Ratings affected include the company's debentures, notes, credit facility, reset put securities and medium-term note program, cut to BB+ from BBB-, its capital securities, cut to B+ from BB,

Moody's assigns Caa1 to new Horizon PCS notes

Moody's Investors Service assigned a Caa1 rating to Horizon PCS, Inc.'s pending issue of $175 million of senior notes due 2011.

In a ratings action affecting approximately $720 million of debt and credit facilities, Moody's also confirmed the existing ratings of Horizon PCS and its subsidiary as described below. The ratings outlook, however, has been changed to negative from stable. The change in outlook reflects the company's higher than expected EBITDA losses, and the incurrence of additional debt given the current state of the company's development.

The affected ratings are Horizon PCS, Inc. senior implied B2, $175 million senior notes due 2011 Caa1, $295 million (face) 14% senior discount notes due 2010 Caa1.

Since Moody's initially rated Horizon PCS in September 2000, the company has built out its network to cover almost 7 million people in its footprint of 10.2 million, and attracted over 146,000 subscribers. These subscribers are generating healthy monthly ARPUs and low levels of churn. However, it appears that these subscribers also use their Sprint PCS phones on non-Horizon PCS networks at higher levels than the company anticipated. Thus despite earning significant amount of travel and roaming revenues this has not translated into better EBITDA performance as Horizon PCS's cost of service has also increased in order to compensate the other network operators.

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